When buyers have private information, the risk to sellers is that they will
A)end up with disproportionately high-cost customers.
B)end up with disproportionately low-cost customers.
C)have an advantage over buyers.
D)be more influential than buyers.

Question

Quizplus · Accepted Answer

When buyers have private information, they may only reveal it to sellers if it is advantageous to them. Therefore, the risk to sellers is that they may end up with disproportionately high-cost customers, as they may not have access to the full information about the customer’s risk profile.

When Buyers Have Private Information, the Risk to Sellers Is